2014 QUALITY OF LIVING WORLDWIDE CITY RANKINGS – MERCER SURVEY

19-February-2014

Canada, Toronto

European cities dominate the top of the list for highest Quality of Living

• Vienna takes the top spot, Baghdad ranks lowest
• Canadian cities dominate North America’s top-five list

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Vienna is the city with the world’s best quality of living, according to the Mercer 2014 Quality of Living rankings, in which European cities dominate. Zurich and Auckland follow in second and third place, respectively. Munich is in fourth place, followed by Vancouver, which is also the highest-ranking city in North America. Ranking 25 globally, Singapore is the highest-ranking Asian city, whereas Dubai (73) ranks first across Middle East and Africa. The city of Pointe-à-Pitre (69), Guadeloupe, takes the top spot for Central and South America.

Mercer conducts its Quality of Living survey annually to help multinational companies and other employers compensate employees fairly when placing them on international assignments. Two common incentives include a quality-of-living allowance and a mobility premium. A quality-of-living or “hardship” allowance compensates for a decrease in the quality of living between home and host locations, whereas a mobility premium simply compensates for the inconvenience of being uprooted and having to work in another country. Mercer’s Quality of Living reports provide valuable information and hardship premium recommendations for over 460 cities throughout the world.

“Political instability, high crime levels, and elevated air pollution are a few factors that can be detrimental to the daily lives of expatriate employees, their families and local residents. To ensure that compensation packages reflect the local environment appropriately, employers need a clear picture of the quality of living in the cities where they operate,” said Slagin Parakatil, Senior Researcher at Mercer.

Mr Parakatil added: “In a world economy that is becoming more globalised, cities beyond the traditional financial and business centres are working to improve their quality of living so they can attract more foreign companies. This year’s survey recognises so-called ‘emerging’ cites and points to a few examples from around the world. These cities have been investing massively in their infrastructure and attracting foreign direct investments by providing incentives such as tax, housing, or entry facilities. Emerging cities will become major players that traditional financial centres and capital cities will have to compete with.”

EUROPE
Vienna is the highest-ranking city globally. In Europe, it is followed by Zurich (2), Munich (4), Düsseldorf (6), and Frankfurt (7). “European cities enjoy a high overall quality of living compared to those in other regions. Healthcare, infrastructure, and recreational facilities are generally of a very high standard. Political stability and relatively low crime levels enable expatriates to feel safe and secure in most locations. The region has seen few changes in living standards over the last year,” said Mr Parakatil.

Ranking 191 overall, Tbilisi, Georgia, is the lowest-ranking city in Europe. It continues to improve in its quality of living, mainly due to a growing availability of consumer goods, improving internal stability, and developing infrastructure. Other cities on the lower end of Europe’s ranking include: Minsk (189), Belarus; Yerevan (180), Armenia; Tirana (179), Albania; and St Petersburg (168), Russia. Ranking 107, Wroclaw, Poland, is an emerging European city. Since Poland’s accession to the European Union, Wroclaw has witnessed tangible economic growth, partly due to its talent pool, improved infrastructure, and foreign and internal direct investments. The EU named Wroclaw as a European Capital of Culture for 2016.

AMERICAS
Canadian cities dominate North America’s top-five list. Ranking fifth globally, Vancouver tops the regional list.  Other top cities include Ottawa (14), Toronto (15), Montreal (23), and San Francisco (27). The region’s lowest-ranking city is Mexico City (122), preceded by four US cities: Detroit (70), St. Louis (67), Houston (66), and Miami (65).

Luc Lalonde, Principal, Mercer Canada commented: “On the whole, North American cities, especially those in Canada, offer a high quality of living and are attractive working destinations for companies and their expatriates. A wide range of consumer goods is available, and infrastructures, including recreational provisions, are excellent. Canada’s relationships with other countries are also good and crime levels tend to be low, relative to other major cities around the world.  Few Canadians will be surprised by Vancouver’s high quality of living ranking.”

In Central and South America, the quality of living varies substantially. Pointe-à-Pitre (69), Guadeloupe, is the region’s highest-ranked city, followed by San Juan (72), Montevideo (77), Buenos Aires (81), and Santiago (93). Manaus (125), Brazil, has been identified as an example of an emerging city in this region due to its major industrial centre which has seen the creation of the “Free Economic Zone of Manaus,” an area with administrative autonomy giving Manaus a competitive advantage over other cities in the region. This zone has attracted talent from other cities and regions, with several multinational companies already settled in the area and more expected to arrive in the near future.

“Several cities in Central and South America are still attractive to expatriates due to their relatively stable political environments, improving infrastructure, and pleasant climate,” said Mr Parakatil. “But many locations remain challenging due to natural disasters, such as hurricanes often hitting the region, as well as local economic inequality and high crime rates. Companies placing their workers on expatriate assignments in these locations must ensure that hardship allowances reflect the lower levels of quality of living.”

ASIA PACIFIC
Singapore (25) has the highest quality of living in Asia, followed by four Japanese cities: Tokyo (43), Kobe (47), Yokohama (49), and Osaka (57). Dushanbe (209), Tajikistan, is the lowest-ranked city in the region. Mr Parakatil commented: “Asia has a bigger range of quality-of-living standards amongst its cities than any other region. For many cities, such as those in South Korea, the quality of living is continually improving. But for others, such as some in China, issues like pervasive poor air pollution are eroding their quality of living.”

With their considerable growth in the last decade, many Asian cities are starting to emerge as important places of business for multinational companies. Examples include Cheonan (98), South Korea, which is strategically located in an area where several technology companies have operations. Over the past decades, Pune (139), India has developed into an education hub and home to IT, other high-tech industries, and automobile manufacturing. The city of Xian (141), China has also witnessed some major developments, such as the establishment of an “Economic and Technological Development Zone” to attract foreign investments. The city is also host to various financial services, consulting, and computer services.

Elsewhere, New Zealand and Australian cities rank high on the list for quality of living, with Auckland and Sydney ranking 3 and 10, respectively.

MIDDLE EAST AND AFRICA
With a global rank of 73, Dubai is the highest-ranked city in the Middle East and Africa region. It is followed by Abu Dhabi (78), UAE; Port Louis (82), Mauritius; and Durban (85) and Cape Town (90), South Africa. Durban has been identified as an example of an emerging city in this region, due to the growth of its manufacturing industries and the increasing importance of the shipping port. Generally, though, this region dominates the lower end of the quality of living ranking, with five out of the bottom six cities; Baghdad (223) has the lowest overall ranking.

“The Middle East and especially Africa remain  the most challenging regions for multinational organisations and expatriates. Regional instability and disruptive political events, including civil unrest, lack of infrastructure and natural disasters such as flooding, keep the quality of living from improving in many of the region’s cities. However, some cities that might not have been very attractive to foreign companies are making efforts to attract them,” said Mr Parakatil.

NOTES FOR EDITORS
Mercer produces worldwide quality-of-living rankings annually from its most recent Worldwide Quality of Living Surveys. Individual reports are produced for each city surveyed. Comparative quality-of-living indexes between a base city and a host city are available, as are multiple-city comparisons. Details are available from Mercer Client Services in Warsaw, at +48 22 434 5383 or at www.mercer.com/qualityofliving.

The data was largely collected between September and November 2013, and will be updated regularly to take account of changing circumstances. In particular, the assessments will be revised to reflect significant political, economic, and environmental developments.

Expatriates in difficult locations: Determining appropriate allowances and incentives

Companies need to be able to determine their expatriate compensation packages rationally, consistently and systematically. Providing incentives to reward and recognise the efforts that employees and their families make when taking on international assignments remains a typical practice, particularly for difficult locations. Two common incentives include a quality-of-living allowance and a mobility premium:

• A quality-of-living or “hardship” allowance compensates for a decrease in the quality of living between home and host locations.
• A mobility premium simply compensates for the inconvenience of being uprooted and having to work in another country.

A quality-of-living allowance is typically location-related, while a mobility premium is usually independent of the host location. Some multinational companies combine these premiums, but the vast majority provides them separately.

Quality of Living: City benchmarking

Mercer also helps municipalities assess factors that can improve their quality of living rankings. In a global environment, employers have many choices as to where to deploy their mobile employees and set up new business. A city’s quality of living standards can be an important variable for employers to consider.

Leaders in many cities want to understand the specific factors that affect their residents’ quality of living and address those issues that lower their city’s overall quality-of-living ranking. Mercer advises municipalities through a holistic approach that addresses their goals of progressing towards excellence, and attracting multinational companies and globally mobile talent by improving the elements that are measured in its Quality of Living survey.

Mercer hardship allowance recommendations

Mercer evaluates local living conditions in more than 460 cities it surveys worldwide. Living conditions are analysed according to 39 factors, grouped in 10 categories:

• Political and social environment (political stability, crime, law enforcement, etc.)
• Economic environment (currency exchange regulations, banking services)
• Socio-cultural environment (media availability and censorship, limitations on personal freedom)
• Medical and health considerations (medical supplies and services, infectious diseases, sewage, waste disposal, air pollution, etc)
• Schools and education (standards and availability of international schools)
• Public services and transportation (electricity, water, public transportation, traffic congestion, etc)
• Recreation (restaurants, theatres, cinemas, sports and leisure, etc)
• Consumer goods (availability of food/daily consumption items, cars, etc)
• Housing (rental housing, household appliances, furniture, maintenance services)
• Natural environment (climate, record of natural disasters)

The scores attributed to each factor, which are weighted to reflect their importance to expatriates, allow for objective city-to-city comparisons. The result is a quality of living index that compares relative differences between any two locations evaluated. For the indices to be used effectively, Mercer has created a grid that allows users to link the resulting index to a quality of living allowance amount by recommending a percentage value in relation to the index.

Mercer Quality of Living Survey 2014 – Top 5 and Bottom 5 cities by Region

The information and data obtained through the Quality of Living reports are for information purposes only and are intended for use by multinational organisations, government agencies, and municipalities. They are not designed or intended for use as the basis for foreign investment or tourism. In no event will Mercer be liable for any decision made or action taken in reliance of the results obtained through the use of, or the information or data contained in, the reports. While the reports have been prepared based upon sources, information, and systems believed to be reliable and accurate, they are provided on an “as is” basis, and Mercer accepts no responsibility/liability for the validity/accuracy (or otherwise) of the resources/data used to compile the reports. Mercer and its affiliates make no representations or warranties with respect to the reports, and disclaim all express, implied and statutory warranties of any kind, including, representations and implied warranties of quality, accuracy, timeliness, completeness, merchantability, and fitness for a particular purpose.

ABOUT MERCER
Mercer is a global consulting leader in health, wealth and careers. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in more than 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With annual revenue of $13 billion and 60,000 employees worldwide, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.ca. Follow Mercer on Twitter @MercerCanada.

Mercer also provides advice and market data on international and expatriate compensation management, and works with multinational companies and governments worldwide. It maintains one of the most comprehensive databases on international assignment policies, compensation practices, and data on worldwide cost of living, housing, and hardship allowances. Its annual global mobility conferences and other events provide companies with the latest trends and research on mobility issues. Visit www.imercer.com/mobility for details. Follow Mercer’s mobility news on Twitter @MercerMobility.